Saturday, April 26, 2014
Is Near Southeast being overbuilt? That's the question being raised by a new report, which argues so much retail space is being built in the Capitol Riverfront area (that's the northern bank of the Washington Channel and the Anacostia River from S. Capitol Street to the Navy Yard) that developers are creating an upscale slum.
That's the new marketing term: "Upscale slum". With so little housing in the area, high-end retailers won't be willing to move into all this empty space. Developers will lower rents, which means that you get McDonald's instead of McCormick & Schmick's. You get wig shops, not art galleries. Enough of this, and developers sell out to landlords with less interest in maintainance and more interest in letting the building get run-down, taking the profits, and running.
An alternative explanation is that developers along Capitol Riverfront are making the same mistake they once made in downtown. In the early 1990s, developers in downtown D.C. built a few highly expensive condos and apartment buildings, which could not generate enough foot traffic to make ground-level retail viable. The city intervened, forcing developers to create smaller units (build 10 apartments instead of a single mega-condo for a husband and wife), build more family units, and build more middle-income units. Instead of a concrete mausoleum that emptied at night and on weekends, downtown suddenly became vibrant and alive.
My sense is that developers are building for the rich. Real estate in the city is so ultra-expensive, only higher-end retailers can afford to lease here. But high-end retailers need high-income residents. But a handful of rich people don't want to walk around at night, or go out to eat every night. A handful of wealthy people who get home at 10 PM can't support restaurant that seats 150. So yes, I think we're in trouble here...